A blog by Joel Barolsky of Barolsky Advisors

Posts Tagged ‘culture’

Are your practice groups primed to win?

In Articles, Commentary on 26 April 2017 at 8:23 am

If each of your practice groups is primed to win, then there’s a pretty good chance your firm will win as well.

With this in mind, there’s much benefit to be derived by assessing all of your practice groups on two dimensions:

  • A winning strategy – from strong to weak, and
  • Execution capability – from strong to weak.

If most of your practice groups are in the weak-weak quadrant, perhaps it’s time to take that call from the headhunter. If all the groups are strong-strong, don’t change a thing! If you have a mix of everything, it’s time to get to work…

A winning strategy

There is a range of factors to take into consideration to assess whether a practice group has a winning strategy for the next three years:

  • Does the practice have clear aspirations to win? Is there a stretch intent?
  • Are they competing in sizeable, growing and profitable market segments?
  • Does the practice have a compelling value proposition, that is, clear reasons why clients should choose them over others?
  • Does the practice have a profitable and sustainable business model? Bonus points if the model is scalable.
  • Is there a Plan B if non-traditional competitors strengthen?
  • Are there pilots and experiments in place creating options for future growth?
  • Is there a clear implementation roadmap with accountabilities, measures and timing?
  • Is it clear what they say ‘no’ to, and why?

Execution capability

On paper, the practice group might have a world-beating strategy but it may not have the skills, resources and systems to implement it.

a cup of coffee on the wood table.cafe latte with tulip latte art pattern on the wooden background.

Source: fotolia

The first, and most important, the question is whether you have the right practice group leader. Is she a true leader or merely a convenor? Does she lead or just manage? While she might seek to lead, does she have loyal followers? Does she have the ability to inspire and support team members to be their best? Is she strong enough to stand up to the recalcitrants?

Other questions to ask around execution capability:

  • Is the team a real team or just a loose coalition of colleagues?
  • Does the team generally follow-through on their commitments?
  • Does the team own its strategy and take accountability for it?
  • Does the team have the right talent necessary to win, now and in three years time?
  • Does the group have access to the right technology, processes and systems to underpin its business model?
  • Is there sufficient open-mindedness to adapt to new inventions and work methods?
  • Are there mechanisms in place to regularly review progress and tweak their plans?

The portfolio

While it’s important to assess the competitiveness of each practice, there’s also a lot of value in assessing the inter-dependencies, synergies and gaps across the portfolio. Another portfolio overlay is the amount of partner equity allocated to each group and expected ROE (return on equity).

A review of the portfolio should indicate which practices require investment, divestment or just be maintained. Handling the politics of these decisions is a topic for another post, or three.

In conclusion

While a firm is more than just the sum of its parts, the parts play a critical role in sustaining success. Your firm’s strategy needs to reflect firm-wide themes like overall market positioning, culture, brand, strategic clients, talent, R&D, infrastructure and support. It also needs to deep dive into the practice portfolio, making sure each plays its part and leverages the strengths of the whole.

Firm purpose. Seven options.

In Articles, Commentary on 5 April 2017 at 12:45 pm

I’d highly recommend Jordan Furlong‘s new book, “Law is a Buyer’s Market – Building a Client-First Law Firm”.

Furlong argues that firms should answer ‘the why?’ question with a statement around creating client success. He states that this approach is congruent with the pursuit of professionalism and will enable the firm to withstand the challenges of increased competition and rapid technology change. Furlong suggests that firms adopt a client-centric purpose statement, something like, “our firm exists to serve the interests of clients in our chosen markets by addressing their legal challenges and opportunities so that those clients can achieve their objectives”.

Cups of coffee on blue background

Source: fotolia

Last weekend I had the opportunity to road-test Furlong’s recommendations in a client strategy workshop. It became clear quite early on in the workshop that while there was strong resonance with a client-centric purpose, it didn’t tell the full story for this firm. They felt that defining purpose solely on clients risked making them client-compelled in areas like pricing and write-offs, and, interestingly, less likely to innovate. They cited numerous examples of innovative ideas that didn’t come directly from clients expressing their needs, but rather from an intrinsic desire to do better than competitors.

To help things along, I presented SEVEN related, yet distinct, purpose statement option:

  1. Client-centric: our firm exists to make our clients more successful.
  2. Business-centric: our firm exists to maximise returns to shareholders.
  3. People-centric: our firm exists for our partners and staff to practise their craft, earn the respect of their clients and peers, and make a good living. In short, the firm is about fun, fame and fortune.
  4. Community-entric: our firm exists to add value to the communities we serve.
  5. Benefit-centric: our firm exists to reduce and manage risk.
  6. Quality-centric: our firm exists to make all other firms look second-rate.
  7. Innovation-centric: our firm exists to set precedent, break new ground and pioneer new products and processes.

I’m happy to report that we came up with a hybrid version that everyone was very excited about. Sorry, I can’t share it here in this post.

Which one of these options, or combination, best describes YOUR firm’s purpose?

Is 2017 the year the fat smoker quits?

In Articles, Commentary on 19 December 2016 at 12:38 am

Eleven years ago David Maister published a brilliant article on the barriers to strategic change in professional service firms. In Strategy and the Fat Smoker, he stated…

Much of what professional firms do in the name of strategic planning is a complete waste of time, no more effective than individuals making New Year’s resolutions (to lose weight or give up smoking).

David argued that most firms were far too successful to seriously consider any radical shifts in strategy. He stated that unless partners faced imminent existentialist threats, equivalent to cancer or a heart attack, they were just going to pay lip-service to a strategy that involved any sort of change.

Much of what I’ve read and experienced as a strategy advisor affirms David’s proposition. But is 2017 going to be the year the fat smoker quits?

Early signs

Over the past six months I have been involved in a significant strategy project in a 100+ partner law firm. One thing that has struck me about this project compared to many others, is the degree of partner engagement in the process. They’ve all turned up. What’s more they all turned up with their their phones turned off. They’ve all seriously tackled the questions of where they will play, how they will win and what change is needed. It’s still a bit early to see if they will execute on their plans, but the early signs are positive.

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Source: Shutterstock

In undertaking the research for the 2016 Thomson Reuters Peer Monitor Melbourne Law School report, I counted more than 25 case studies of established Australian BigLaw firms launching new services, business models or joint venturing. Each one of these changes would have had to pass through a vote of partners. This points to a resolve to innovate AND, more importantly, the ability to follow-through.

The typical resistors to change are very well document, but I think there are three factors that might make 2017 the year of slimmer, healthier professionals.

#1 Transformed leaders

“Company transformations accelerate when a critical mass of leaders transform themselves… Insight is the first step. Choice is the second step. Practice is the third step.” Carolyn Aiken

It’s a big call, but I think many of Australia’s professional service leaders have begun to transform themselves. They are going through the personal change journey of rejection and denial, through to acceptance and commitment. Many have seen the writing on the wall, challenged their beliefs and sought to reinvented themselves. This has in turn has led them down the path of changing the people around them and crafting a new strategy and culture for their firms. With a stronger guiding leadership coalition, firms themselves are in a much better position to embrace change.

The evidence for my transformed leader assertion is not definitive. It’s based largely on the tone and content of discussions at recent conferences, retreats, panels, media comments and blogs. The dialogue at this fabulous Chris Merritt-hosted panel is a clear case in point.

#2 Hip pocket

The 2016 Peer Monitor report indicates lower overall profit per equity partner due, in part, to declining client demand, increased discounting and rising expenses. The data also suggests a wider variation between top- and bottom-earning firms.

For many partners, there is increased pressure to justify their equity status and share of profits. Even a small drop in earnings or a delay in distribution payments, signals the reversal of a long-term trend of growth and abundance. The misfortunes of KWM in Europe have also raised more than a few eyebrows. The hip pocket is now in play, even though at this stage it’s more symbolic than catastrophic.

#3 Client pressure

Leadership guru, Simon Sinek, has a very simple but compelling message: start with why! His view is that success comes from finding an authentic purpose for the firm. The answer to the “why” question in most professional firms is about helping clients succeed, that is, saving clients money, reducing their risk, solving their problems and realising their opportunities sooner. The voice of the client is a big deal in many professional firms. How clients think and feel is a key catalyst for change.

With a shift to a buyers market, more and more clients are speaking their mind and voicing their pains and gains. Many more are asking for their professional advisors to share risk and justify their fees. While this client pressure is not a new phenomenon, 2017 will seek a continuation of this trend and force many professionals to adapt to new models of service and pricing.

In conclusion

The pace of change is only likely to increase in the years ahead. While many commentators paint a picture of doom and gloom, I have a more optimistic view and see clear signs of firms remaking themselves. There are forces at play softening the ground for fundamental and sustainable change. Yes, there will still be laggards, but as Maister concludes…

If we are prepared to rethink how we view strategy and business life, then people can achieve things they never thought possible. If I can become a fit, nonsmoking exerciser, there’s truly no limit!

Postscript

Thank you all my clients, referrers, collaborators and friends for a fantastic 2016. It’s been the best year yet in the life of Barolsky Advisors P/L.  I hope you have a safe and rejuvenating holiday season and a prosperous 2017.

Two-speed firms: the problem and solutions

In Articles, Commentary on 20 November 2016 at 5:22 pm

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“We have a two-speed firm! There’s one group of partners who are ambitious and willing to spend the extra energy necessary to win new business. And then we have another group, who work hard but are broadly happy with the way things are. In reality, they expend far less energy than the first group. The problem is we’re all rowing the same boat. Rowing at different speeds makes us go in circles, not forward.”

Does this sound familiar?

The expectations of partner energy, commitment, speed, fire-in-the-belly, etc. are missed in most strategy discussions. You might have motivational words in your purpose, vision and values statements. Your goals might include stretch revenue and profit targets. But, if you look carefully, there’s nothing there on how much petrol needs to be spent by each individual partner. It is just ASSUMED that every partner will be equally committed and energised.

Five key reasons

I think think there are five main reasons why energy expectations are not adequately discussed:

  1. Remuneration model: the view in some firms is that those willing to invest more will be paid more, and therefore there’s no need to talk about it. The problem is that discretionary reward, on its own, is a very blunt (and lazy) performance management tool. Over time, it entrenches a multi-speed firm.
  2. Measurement: there’s no easy and accurate measure of energy level. Firms may have proxies like billable hours or hours worked, but these measures can be gamed and do not really capture the temperature of belly fire. As firms introduce different business models and new flexible work arrangements these measures become even less relevant.
  3. Confrontation: talking about energy expectations inevitably leads to heated discussions as to whom is contributing more or less. Firm leaders often prefer harmony over harrowing debates around relative commitment.
  4. Autonomy: in many firms partners believe their autonomy is paramount and should not be questioned. As owners, they should be free of “big brother” accountabilities around how and where and how much time they spend.
  5. Outputs over inputs: some people will argue that assessing energy feels like clock-watching – a focus on time spent rather than outcomes achieved.

#1 Focus on partner engagement

The conventional solution to address a two-speed partnership is to shine the light on the “under-performers” and hope that this will shame them into speeding up. This is often coupled with a stern conversation around accountability and the threat of sanctions. In my experience, this approach seldom has enduring success and often ends badly.

An alternative approach is to shine the light on everyone in the spirit of support and development. The idea here is to frequently check-in with the whole partner group on questions like:

  • What’s going well?
  • What’s causing you the most stress at the moment?
  • How’s your team’s strategy implementation going?
  • What support do you need?
  • What are your key priorities over the next period?
  • What things might get in the way of success?

The logic there is that through greater transparency and a more supportive leadership style there will be a positive impact across the board. This approach is aimed at growing the overall pie and reducing dissonance between the fast and the slow.

The reason this approach is seldom attempted, or, if it is, implemented badly, is that it requires the firm leaders to do some serious heavy lifting. It’s practically impossible to do well in medium and large firms.

Until now…

There are a range of new applications, like Jobvibe (an Australian start-up), Wethrive and Culture Amp, that allows for easy frequent check-ins to assess how people are feeling at work, and to identify and resolve issues quickly. The trick is to tailor the questions for professional services and for the partner group in particular, and to run it out of the managing partner’s office, not HR.

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#2 Agree a partner charter

A complementary approach is to agree the social contract between the firm and its partners. As Nick Jarrett-Kerr explains, these partner codes or charters should agree explicit expectations for each partner in regard to :

  1. their dealings with the firm, for example, to accept the spirit and the letter of the firm’s strategy;
  2. their treatment of the firm’s clients, for example, promoting the highest standards of professionalism, truthfulness, integrity and trustworthiness;
  3. their dealings with fellow partners, junior staff members and support staff; and
  4. their personal learning journey and commitment to ongoing development, improvement and innovation.

I’d suggest adding a fifth dimension which describes the expectations around commitment and energy levels.

#3 Team profit contribution

Some firm’s have shifted focus away from individual revenue targets to team profit contribution. Rather than set individual budgets, the core accountability is for the team to deliver a specific profit outcome. Team members need to work through the optimum approach, roles and requisite energy levels. While there are many positives to this approach, it may further entrench silos and factions. It may also hide enduring aberrant behaviour by some individuals.

Call to action

I don’t think there is a magic silver bullet to address the issue of variations in partner contribution. It’s a complex, politically sensitive problem. The key is not to ignore the problem as it festers rage in the fast, and facilitates a victim mindset in the slow. Without active positive leadership, you’re charting course for a circling boat.

Photo sourced from dreamstime.com

Five steps to becoming a more agile firm

In Articles, Commentary on 31 August 2016 at 1:37 pm

Most professional service firms have woken up to the reality that if you’re changing slower than your competitive environment you’re going backwards. So the next question is, how do we change, or better still, how do we change faster?

This post offers a simple step-by-step guide to address this question.

Step 1: Choose your firm’s innovation approach and risk appetite

There are four broad options for consideration:

  1. Pioneer – seek to create a first-mover advantage by inventing new things of value.
  2. Fast follower – seek to adopt emerging ideas that appear to be working and allow others to bear the risk of failure.
  3. Sync with majority – seek to be part of the majority of firms that adopt new ideas when there is a clear and compelling case to do so.
  4. Laggard – seek to adopt new ideas when the opportunity cost of retaining the status quo becomes unbearable.

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It is important recognise that in the absence of an active choice, the Laggard option is the default position for most professional service firm partnerships. There are many well-documented reasons for this, but perhaps the most compelling is that most of these firms have cash-hungry shareholders unwilling to invest meaningfully in long-term R&D.

Step 2: Choose the type of innovation

Many firms tend to think of innovation as the invention of new products or services. This is just one of many types of innovation available along a firm’s value chain. A really useful typology has been put forward by Larry Keely and others in their book: 10 Types of Innovation:

For professional firms, the only thing I’d add to the Keeley model is “Pricing, risk and value” in the Offering (yellow-shaded) section. This will include innovating on pricing structures, risk and reward sharing models, and value creation/ communication/ demonstration.

Step 3: Choose the focus of innovation

Adopting new information and communications technology (ICT) is often thought of as the primary way to innovate. There are countless examples of ICT being used to offer something new, to improve service or take-out cost, eg. smartphone apps, online stores, workflow tools, document assembly software, cognitive technologies, e-discovery, client portals, etc.

Before leaping head first into high-tech solutions, it’s important to recognise there are two other options available:

  • High-touch. This type of innovation involves enhancing your client service experience by making it more up-front, close and personal. Improving the emotional engagement and human interactions with your clients can generate greater loyalty and advocacy. High-touch can also relate to the way you recruit, induct, train, develop, career manage, lead and motivate your people. It does not necessarily involve new software or hardware, but rather novel ways of getting your top talent to stay and perform to their full potential.  A recent example of this is Grant Thornton Australia and Gadens who now offer all their staff 6-months paid parental leave.
  • High-design. This type of innovation involves addressing the underlying client problem by making a change in the process or approach. A famous illustration of this, is the case of the engineers who were asked to quote on upgrading the lifts in an old building after a string of complaints from tenants. The engineers offered two solutions: a multi-million dollar lift upgrade or a $1K solution that involved placing mirrors in each foyer to distract waiting tenants. The client opted for the second solution and complaints dropped off markedly. In reviewing the list of recentAustralian legal innovation award winners, many of the examples relate to co-designing or co-creating solutions with clients.

Firms seeking to innovate their client service experience might wish to think of a combined high-tech, high-touch and high-design solution, the combination making it truly distinctive and difficult to emulate.

Step 4: Calibrate the degree of change and align expectations

It’s important that firms calibrate the degree of change and align outcome expectations with all stakeholders. This involves agreeing where on this continuum are you seeking to play: from incremental tactical small-scale changes, through to large-scale transformational interventions that come with much bigger risks and returns. Creating alignment on this point is extremely important so as to ensure you under-promise and over-deliver.

Step 5: Choose innovation projects or process or both

The fifth step is to agree whether your firm will be focused on a series of discrete innovation projects, or to try to develop an innovation culture that will pervade everything the firm does? Most firms try do both simultaneously, but I observe that many professional service firms tend to do better when they start with a projects focus, get some early wins, and then extend their effort into adapting the firm’s culture.

A project-based approach can be more co-ordinated and discerning. For example, this method allowed one leading Australian law firm to create an internal competition for great ideas with a panel of experts deciding which ones to fund. The problem with a centralised approach is that it’s often biased towards big ideas rather than incremental improvements. Another issue is that a number of staff with great ideas might be intimidated by entering a tank full of sharks.

Adopting a culture-focus often means the innovation effort is decentralised and relatively uncoordinated. This bottom-up approach can free up everyone to be enterprising and yield a major benefit from diversity. It can also mean nothing actually happens because everyone’s so busy trying to meet their utilisation targets there’s no time nor incentive to try do anything different. It can also result in duplication and a waste of resources on well-intentioned, but strategically sub-standard ideas.

A subsequent post will explore the levers that firms can pull to accelerate their progress on the innovation culture journey.

In conclusion

Taking the five steps together, you might elect to become a Pioneer (#1), innovating around the client experience dimensions (#2), seeking a combination of high-tech, high-touch and high-design solutions (#3), open to transformational changes (#4), through a series of carefully selected projects (#5).

Or you might just remain a Laggard…

 

Photo source: dreamstime

Success = Ability + Stability + Agility

In Articles, Commentary on 23 March 2016 at 9:41 am

It’s remarkable how many professional service firms have flourished for years by focusing on just two things: [1] their technical and service ability, and [2] maintaining the firm’s cultural stability, including partner cohesion and retention.

In my 27+ years consulting to lawyers, accountants and other advisors, I’ve come across many successful firms with undifferentiated brands, poor management disciplines and ho hum business models. Super profits were generated merely by being technically sound and keeping things collegial. More or less, they succeeded by just showing up!

But no more…

A new string to the bow

coffee time , watch drawing on latte art coffee cupWith the pace of environmental change accelerating from snail to supercar, firms need to add a new string to their bow. Sustained success will require a combination of ability ability, stability and agility. To my mind, agility refers to three main capabilities, all done with pace and precision:

  1. Sensing – picking up relevant changes in the client and competitor arenas.
  2. Nous – identifying creative options and making good commercial choices.
  3. Adaptation – executing changes to meet new needs and realise new opportunities.

 

Are we risking it all?

The message around agility is not new.  The problem is that many practitioners hear this message, but implicitly reject it. In their minds, the call to be agile potentially contradicts the other two foundations of firm success, namely, ability and stability. Typical questions/objections: how can we innovate and be stable at the time? How do we self-disrupt and retain our cohesion? How can we proclaim expertise in things we’ve never done before? Why should we risk the very things that have enabled our success to date?

What to conserve. What to let go.

The key leadership challenge is dealing with this issue is to discern what what to conserve and what to let go. Firms need to have honest and intensive conversations around the things to protect, and the areas of change. The inherent contradictions and paradoxes of ability, stability and agility need to be explored and worked through. At the same time, leaders need to to be resolute that it’s an AND argument not an OR argument – the firm needs all three, not just one or the other. Without this level of introspection, innovation will just be a fad and will never become a core strategic capability.

Foundation questions

If you’re serious about competing in a fast-changing, intensely competitive environment, you need to ask how to become a firm that…

  • values stability AND agility?
  • values precedent and evidence AND is willing to try something new and unproven?
  • wants people to have the freedom to fail and to take risks AND ensures accountability?
  • wants to invest in long-term innovations AND delivers on short-term profit expectations?
  • is good at making AND buying (i.e. co-sourcing to add speed and capability)?
  • is systematic about making commercial decisions AND is super responsive to intrapreneurs?
  • frees people up to develop and execute new ideas AND rewards utilisation and monthly billings?
  • is good at high-tech AND high-touch?
  • is good at starting new projects AND stopping bad ones?
  • has the ability to listen and respond to clients AND the ability to offer new things not asked for or expected?
  • fosters partner collegiality and autonomy AND is willing to let go of sacred cows?
  • is prepared to develop and roll-out rapid solutions AND be committed to precision and error-free service?
  • has the confidence to be a leader in its field AND the humility to co-create with others.

Cultural fit, or do you mean no misfit?

In Articles, Commentary on 25 September 2015 at 7:05 am

I’d love a dollar for every managing partner that says they want to recruit a new person, or acquire a new practice, that has the right cultural fit. What does that really mean? When push come to shove, in most firms cultural fit is a proxy for “no dickheads” (to quote a client or two). It means a person like us who won’t disrupt the status quo. It’s not really cultural fit, but rather no cultural misfit.

I think viewing cultural fit in this way is a missed opportunity and doing a disservice to your firm’s strategic potential.

Your culture club

salons_coffee_art_contest_our_daily_shotsYour firm’s culture club can be divided into three groups: Misfits, Colleagues and Catalysts. Misfits are unmanageable non-team players who have been retained either because they’re major rainmakers and/or the firm’s leadership hasn’t had the guts to have the hard conversation. Misfits are sometimes referred to as cultural terrorists.

Colleagues are those that fit in and play by the tacit and explicit rules. They are solid performers and contributors within the current cultural norms.

Catalyst are those that will help create the firm you want to become. They’re the agents of change that enable the firm to adapt to new client demands and competitive realities. Whilst Catalysts are collegiate and respectful of others, they are disruptive in that they act as symbols and sources of energy for new ways to operate and compete.

Misfits and Catalysts are sometimes confused in they both discordant, and therefore risky and confronting. The critical difference is that Catalysts are willing to put the firm first, their motivation is less about ego and personal power.

During recruitment, most Misfits try their best to present well, however, one can try discern their true colours via a combination of personality profiling, personal references and behavioural-event interviewing.

Strategic potential

A firm with 100% Colleagues, and therefore no Catalysts, will feel like a cosy club but is likely lose ground to competitors over time. In a turbulent environment if you’re not adapting at the same speed or faster than the market you’re going backwards. Catalysts help you adapt but with a level of control and discipline. They enable the firm’s culture to move beyond nice and to develop real cultural differentiation.

Map your firm

When you are about to do your next round of partner appointments or a senior lateral hire, think less about general cultural fit and more about whether you want a Colleague or a Catalyst?

Another worthwhile exercise is to map your current partner cohort into Misfits, Colleagues and Catalysts. It’s probably time to bite the bullet (and load it at the same time!) and address your cultural terrorists. In asking firms if they’ve had any regrets in letting their Misfits go, the universal response has been, “just one – we should have done it ages ago”.

The really tough question is whether you have the right number and type of Catalysts that will create the firm of the future?

Photo source: http://salon.com

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10 reasons why culture eats strategy for breakfast

In Articles, Commentary on 4 September 2015 at 10:53 am

Over the past 12 months I have worked with three professional service firms that have outperformed their peers. Despite operating in flat markets they have consistently recorded double-digit revenue and profit growth. This success has come without superstar rainmakers, with undistinguished brands and with no fancy shmancy disruptive business models.

So what is it that has made them so successful?

To me it’s cultural differentiation. Not market differentiation, but an internal culture that creates value, both internally and externally. It’s a culture that’s eating strategy for breakfast, as famously proclaimed by Peter Drucker.

Based on these three case studies and other research, I posit that there are ten areas where cultural differentiation really counts.

#1 Productive politics

img90In firms with highly politicised cultures, enormous energy is expended addressing internal matters like performance measurement (i.e. who takes credit), partner remuneration, client ‘ownership’ and resource hoarding/sharing. Power struggles and infighting between divisions, office locations, teams, practices and individual partners distract from value creating time with clients and staff. A managing partner of leading law firm once revealed to me that he spent around 40% of his time on an annual basis making, negotiation and justifying partner remuneration decisions.

Politics is inevitable, but firms that effectively balance collective, individual and directed power have a huge competitive advantage.

#2 Collaboration

Recent Harvard Business School research has revealed that when different practice teams are able to collaborate around client needs, there is a massive positive financial impact. In one case study, the average annual revenue per client increased from US$150,000 to US$800,000 by having seven practice groups offering an integrated solution versus cross-selling seven discrete services.

Those firms that have transitioned from a “my client” to “our client” culture usually outperform those where partner autonomy reigns supreme.

#3 Consistent high standards

I recently chaired a panel discussion with three senior buyers of professional services. One of the questions put to the panel was whether there was a difference between top performing firms and the rest? Consistency was the universal response. Top firms were characterised by extremely high technical and service standards delivered consistently by everyone. In other firms they felt it was a bit hit and miss.

There is much evidence to support the proposition that successful firms are those that have cultures that are intolerant of mediocrity and expect and get high standards from everyone.

#4 Discretionary effort

Organisation cultures that are perceived to be genuinely caring, trusting and fair tend to get the best out of people. Staff are more likely to go the extra mile, to act above and beyond the call of duty, or just do that little bit more. Toxic cultures often result in lower productivity, higher absenteeism and substandard output.

#5 Continuity

In their bestselling book, The Service Profit Chain, Heskett, Sasser & Hart referred to research that showed that client satisfaction increased significantly with staff continuity. In situations where a financial services client had five different relationship managers over a two-year period only 40% clients were satisfied or very satisfied. This jumped to over 80% where there had been only one relationship manager. Continuity builds understanding of the client and fosters deeper relationships. These factors are critical in client choice, loyalty and advocacy.

Positive firm cultures facilitate retention and ensure continuity. A stable workforce also reduces the direct costs associated with staff churn.

#6 Alignment

Each of the three case study firms mentioned in the introduction to this blog post are characterised by a lean management structure. All leaders across the firm, but excluding the managing partner, still retain significant practices. In a way each team or cell within the firm has an ethos of self-sufficiency. They don’t see themselves as paralysed subordinates waiting for orders.

Alignment around firm direction, trust in leadership and a strong culture provides the glue that prevents anarchy but at the same time allows individuals and teams to be empowered. Self-management results in a significantly lower investment in planning, control and oversight and therefore more time on winning business and delivering work profitably.

#7 Busyness

In most professional services, busyness begets busyness. There is much evidence to support the notion that smart, highly motivated professionals seek to master their craft by doing good work for good clients. ‘Bring it on’ most say. In my experience the assumption that better work-life balance creates more staff engagement only applies to a minority. Consequently, one can conclude that a positive productive work culture creates more capacity to do even more work (within limits of course).

#8 Agility

If your firm is changing slower than the competitive environment around it, you’re going backwards! Firms with strong market and client-oriented cultures are really good at two things: [1] sensing and predicting trends, and [2] willing and able to make the necessary changes to adapt to different conditions. Agility and adaptability are cultural elements that are the hallmarks of successful firms in turbulent times.

#9 Fire in the belly

Business development is both a relationship game and a numbers game. Without some personal connection it’s very hard for a prospective client to develop enough trust to say yes. Equally, there will be fewer sales opportunities if you don’t show up. In tough times, there is usually a reward for those professionals with some fire in the belly and show up more often than others. The hunger to win is more intense and bears fruit in fuller pipelines and better strike rates.

#10 Execution

The last cultural element is related to all the others but is worthy of a mention on its own. It relates to the efficiency and effectiveness of implementing strategic decisions. It’s the ability to make it happen, to have the discipline and fortitude to overcome obstacles and to follow though on agreed actions. It seems so obvious, but so many firms struggle with this ‘simple’ ability to execute.

In conclusion

It is common for professional service firms describe their cultures as “collegiate”, “respectful” and “friendly”. In these tough times I don’t think just being nice is going to make a difference, to generate real value. Thinking beyond nice is incumbent of every professional service leader. Striving for true cultural differentiation will allow you to have culture for breakfast, strategy for lunch and champagne over dinner…

Photo source: http://nespresso.com

Advancing the retreat

In Articles, Commentary on 21 January 2015 at 8:12 am

Planning to run a partners retreat, off-site or conference later this year? As a facilitator of many retreats I thought you might find these five design principles helpful in crafting your 2015 agenda.

#1 Open Eyes

The retreat needs to go beyond the regular monthly performance update. It should open partner eyes to the true strategic health of the firm – the good, the bad and the ugly. The aim should be to tell the truth in a constructive and considered way. A glossy state of the nation address serves no one’s interests.

As a practical example of this, I was recently engaged to interview 10 clients, 10 competitors and 5 consultants to provide a fresh independent perspective on how a particular firm was positioned to meet the challenges of the Australian legal market. This strategy health check yielded a rich discussion on the firm’s distinctive strengths as well as one or two blind spots.

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#2 Open Minds

Many professionals are trained sceptics. This scepticism, coupled with stellar career success, leads to very conservative thinking and behaviour – what’s worked in the past will be the foundation of success into the future. This mindset is dangerous in a rapidly changing, intensely competitive environment.

Some of the best retreats I’ve been at have included “light-bulb” presentations from outsiders opening partner minds to fresh perspectives and methods. These outsiders have included, in descending order of impact, leaders of successful peer firms, key clients, heavy hitters from industry, respected alumni, market commentators, researchers and content experts.

Another approach I’ve seen work really well is to run live “what-if” simulations. The firm’s P&L is presented and then a series of scenarios presented to demonstrate the long-term impact on partner income. The discussion then opens up and what-if questions are then simulated and the results revealed in real time. This is partly firm economics 101 in disguise, but also it’s a really useful way to show the long-term impact of things like margin erosion, cost containment, staff engagement and strategic investments or divestments.

#3 Open Hearts

“Building relationships with colleagues”, often tops the best things list in post-retreat feedback. As firms grow in both size and footprint it gets harder for partners to partner. They simply do not know their colleagues, what they’re like as people, what they’re really good at and how they might add value to clients.

Structuring (but not over-structuring) social time and activity is critical. It amazes me how often firms will book retreats at expensive resorts with glorious recreational facilities and then spend 95% of the time in meeting rooms observing other guests enjoying them.

#4 Open Questions

Retreats are often good opportunities to work on the business and solicit partner views as owners and stewards of the firm. One constructive way to address this is to ask a few carefully crafted open questions and to structure a debate around these dilemmas. For example, “Australian patent firm Spruson & Ferguson IPO’ed late in 2014 and now has a market cap over $570 million. Should we do the same?” 

These open question sessions can be set up with a presentation of relevant background data and commentary. The key is to let the discussion be open and unstructured while at the same time keeping it insightful, strategic and relevant.

#5 Open Doors

Almost every retreat I’ve attended starts out by welcoming new partners – both internal appointments and lateral hires. Other than a cursory mention of their name not much else is done to truly open the door to those joining the club. I think this is a missed opportunity to get fresh perspectives on the firm and to avoid group think.

One firm I know asks all their lateral hires to do a short presentation comparing their old firm to the new on five dimensions: culture, governance, pricing, work practices and strategy. This is really helpful in three ways: profiling competitors, benchmarking and showcasing their new partners.

In conclusion

While retreats can be a black hole in terms of time and dollars, many successful firms continue to see a return from this type of investment. The trick is not to view it as an extended partners meeting but rather as a major opportunity to build the spirit and the strategy of the partnership.

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